US steelmaking capacity utilization rates are still down markedly year-over-year, but sources close to SteelOrbis have said that mills “are still bringing back capacity too fast,” evidenced by still-soft flat rolled steel pricing.
Earlier this week, AISI reported that as of week ending July 11, the capacity utilization rate was recorded at 57.5%, down from 79.4% the same reporting period last year but up from 56.6% the previous week.
“There’s too much steel and not enough demand,” a source said, adding that while it’s good that automotive production has resumed, “increased demand from the automotive sector doesn’t seem to be helping the market.”
“Either they’re still burning through the steel they have, or the mills have ramped up production beyond what automotive is consuming,” another source continued.
Others are pointing to news that Ford Motor Company may need to halt some production, because their engine supply plant in Chihuahua, Mexico is only functioning at 50% capacity due to coronavirus restrictions. This is also causing some concern in terms of current cap rates.
In terms of spot market prices, US HRC prices have softened by $1.00 cwt. ($22/mt or $20/nt) on the top end in the last week, to an average of $22-$23 cwt. ($485-$507/mt or $440-$460/nt), ex-mill.
US CRC prices, which were trending at $32-$34 cwt. ($705-$750/mt or $640-$680/nt) a week ago, are now being heard at $30-$32 cwt. ($661-$705/mt or $620-$640/nt), ex-mill, although multiple sources have said that deals up to $1.00 cwt. ($22/mt or $20/nt) below that range have been heard in the marketplace.
US HRC and CRC lead times are being heard at 3 weeks and 5-7 weeks, respectively.
And while some had questioned whether yesterday’s explosion at ArcelorMittal’s Burns Harbor blast furnace would lead to some “psychological price firming” for flat rolled steel products, at least in the temporary sense, others are more skeptical.
“There are other blast furnaces in other place that can be brought back online, and at this point the mill is saying it doesn’t expect that [the explosion and closure of blast furnace D] will impact their ability to fulfill orders,” another source added.
Also of note are news reports that the US coronavirus task force has recommended that 18 states that are in the “coronavirus red zone” should roll back reopenings and re-close certain types of businesses. Although it’s not currently expected that this will impact manufacturing or steel output, it is expected to take a toll on demand for manufactured goods. It’s further believed that US unemployment rates, which have improved slightly, may soon take a turn for the worse.